2012-02-28_REVISION - M1980244 (85)

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5.2 Establish an assurance mechanism capable of fully funding cyanide - related decommissioning activities. The operation is: • in full compliance ❑ in substantial compliance ❑ not in compliance...with Standard of Practice 5.2. Describe the basis for this Finding/Deficiencies Identified: CC &V's governing permit requires estimation and establishment of a financial warranty for the third -party decommissioning of all aspects of mine operations, including all cyanide infrastructure. Permit M- 1980 -244 has been amended once since 2007 (Amendment No. 9, approved April 2008) to address various MLE actions. On an annual basis, CC &V is also obliged to report completed reclamation actions, new disturbances anticipated in the upcoming year, and estimated reclamation actions for the ensuing year. The permit also requires that TRs or amendments, as appropriate, be prepared for project changes, including changes that may affect cyanide - related decommissioning. The adequacy of the financial instrument must also be evaluated with each TR submittal and/or submittal of any additional permit Amendments. The permit also mandates the establishment of a financial warranty to address the decommissioning of all aspects of mine operations, including all cyanide infrastructure, assuming the use of third -party resources. The governing permit requires that the warranty be evaluated at least annually (or as necessary to accommodate project changes documented by permit Amendment or TR) and adjusted as appropriate in response to revised estimates. Each annual report, Amendment, or TR is subject to review, approval, and acknowledgement of updated financial warranty estimates by the responsible permitting specialist from the state Department of Natural Resources, Division of Reclamation, Mining, and Safety (DRMS). Review of the latest closure cost summaries clearly identifies chemical closure of the VLF (rinsing and neutralization), building demolition (which would include the ADR Plant and monitoring sheds /pumphouses), and removal of associated infrastructure (e.g., roadways, fences, powerlines, pipelines). Based on the information reviewed, decommissioning values associated with these cyanide- related areas or tasks are substantially less than the ultimate financial warranty value. It may also be noted that these same third -party decommissioning estimates form the basis of the financial representations of liability that CC &V must periodically transmit to its parent company, and as such are subject to periodic internal and external financial audits in accordance with International Financial Reporting Standards (IFRS) and Generally Accepted Accounting Principles (GAAP). Cresson Project Name of Mine September 22, 2010 Signature of Lead Auditor Date Page 23 of 36